State enabling legislation refers to a range of initiatives taken at the state level to make it possible, easier, or even encourage cities and/or counties to create their own housing trust funds. These range from states passing legislation enabling cities or counties to create housing trust funds to legislation that actually identifies a revenue option and provides matching funds. These initiatives have had a huge impact on the number and growth of local housing trust funds in the United States.
Here is a brief description of the legislation in place in fourteen states, separated into three categories:
Enabling a Revenue Source Option for Local Housing Trust Funds
State Funds to Support Local Housing Trust Funds
State Enabling Legislation for Local Housing Trust Funds
Enabling a Revenue Source Option for Local Housing Trust Funds:
Indiana law enables a county containing a consolidated city that has adopted a housing trust fund to authorize the county recorder to charge $2.50 for the first page and $1.00 for each additional page and commit 60% of the revenues collected to the local housing trust fund. The remaining 40% goes to the state housing trust fund. The trust fund is to provide grants and loans for affordable housing for households with incomes at or below 80% AMI with half of the funds serving those earning no more than 50% AMI; administrative expenses of the fund; and technical assistance to nonprofit developers of affordable housing. An appointed eleven-member advisory committee is to be established with representation from the housing industry and the community to advise on policies and procedures and long term capital. Passed in 2007.
Massachusetts Community Preservation Act: communities may adopt the Community Preservation Act by passing, through a vote of the public, a surcharge of up to 3% on real property taxes. The funds must be used for open space protection, historic preservation, affordable housing and outdoor recreation and at least 10% of the revenues collected must be spent in each area. The CPA statute also creates a statewide Community Preservation Trust Fund, which distributes funds each year to communities that have adopted CPA. Each CPA community creates a five-to-nine member board that makes recommendations on CPA projects to the community’s legislative body. Community housing is defined as low and moderate income housing for individuals and families. Any real property interest that is acquired with monies from the Community Preservation Fund is to be bound by a permanent restriction, recorded as a separate instrument. Passed in 2000.
Missouri Homeless Families Act. Missouri enables three first class counties to use document recording fees for homeless programs. A majority of the voters must approve a user fee of $3.00 on all recordations. Funds may be used to provide services, shelter and housing, and other activities to prevent homelessness.
Oregon (SB1533 B 2016) established a new authority (Chapter 059, 2016) for cities and counties to impose a Construction Excise Tax on new construction or construction adding square footage to an existing structure:
- Residential construction, at a rate of 1% of the value of the permit value of the construction.
- New commercial and industrial construction, with no cap on the rate of the CET.
The local government imposing the CET may retain 4% of CET revenues as a fee for administering the tax. After this fee, the residential CET revenues are to be distributed as follows:
- 50% to developer incentives as set out in Section 1 of the bill.
- 15% to Housing and Community Services Department to fund homeownership programs that provide down payment assistance.
- 35% for affordable housing programs and incentives as defined by the local jurisdiction.
For a CET imposed on commercial or industrial development, 50% of revenues after the administrative fee must be expended on programs related to housing.
The Option Affordable Housing Trust Fund Act, commonly known as Act 137, permits counties to double document recording fees for deeds and mortgages by a vote of the county commissioners. The funds are to be used to increase the availability of quality housing for households earning less than the median income of the county. Fifteen percent of the funds may be used for administrative costs. Passed in 1992.
Pennsylvania also created PHARE (Pennsylvania Housing Affordability and Rehabilitation Enhancement Act)—a state housing trust fund which receives revenue from the Marcellus Shale Impact Fee legislation (subsequent legislation has added statewide funds from the future growth in revenue from the real estate transfer tax). The impact fee funds are distributed to counties impacted by unconventional gas wells. Half of the funds must go to rural counties. At least 30% of the funds must be targeted to households earning below 50% of AMI. Annual plans and reporting are required. Long term affordability is encouraged.
These issues are promoted: (1) maximizing leverage of resources (preference is given to counties that include the Optional Affordable Housing funds (Act 137) in their application); (2) addressing the greatest need; (3) fostering partnerships; (4) effective and efficient use of resources; and (5) creating plans and an allocation process that will equitable meet the needs in the communities and establish a process the provides transparency to all stakeholders. Passed in 2012.
RCW 84.52.105 authorizes a town, city or county to impose additional regular property tax levies of up to fifty cents per thousand dollars of assessed value of property in each year for up to ten consecutive years. The funds are to finance affordable housing for very low-income households. The levy must be approved by a majority of the voters. The governing body must declare the existence of an emergency with respect to the availability of housing for very low-income households and adopt an affordable housing financing plan for expenditures raised by the levy. Passed in 1995.
RCW 82.14 authorizes a city or a county to impose a 1/10 of 1% sales tax for affordable housing, mental health facilities, operations and maintenance, and services. funds for affordable housing; mental health facilities; and/or O&M. Must serve 60% AMI or below within certain population groups. Remaining funds would be used for behavioral health treatment programs and services or housing-related services. Passed in 2015.
RCW 36.22.178 increased document recording fees across the state and created the Affordable Housing for All Surcharge. Numerous amendments have been made including boosting the fee. All fees now total $38 per document with 1.58% going to auditors; 65.3% to counties; and 33.1% to the state’s Home Security Fund account. The fees sunset on June 30, 2019. Counties are permitted to retain up to five percent for administrative costs and funds distributed to counties for use by the county (and its cities and towns) are for affordable housing activities that serve very low-income households. Passed in 2002.
RCW 43.185C and RCW 36.22.179 created the Homelessness Housing and Assistance Act and added a $10 document recording fee with revenues going directly to counties and a portion to the state Home Security Fund. The goal is reducing homelessness by 50% by 2015 and is intended to help implement plans to end homelessness. The act requires homelessness plans by the counties and the state. RCW 36.22.1791 added an additional $8.00 to the document recording fee.
HB 2263 enables County legislative authorities to implement a 0.1% sales and use tax, if approved by a majority of voters, in order to fund housing and related services. A city may implement the whole or remainder of the tax, if approved by a majority of voters, and the county has not opted to implement the full tax. A minimum of 60% of revenues collected must be used for construction, operations and maintenance costs of affordable housing, facilities providing housing-related services, or mental and behavior health-related services or evaluation and treatment centers. Funds are to support individuals with income below 60% AMI, including: individuals with mental illness, veterans, senior citizens, homeless families with children, unaccompanied homeless youth, persons with disabilities, or domestic violence victims. A county may issue bonds against up to 50% of the revenues to support eligible construction activities; the remainder of the funding must be used for the operation, delivery, or evaluation of mental and behavioral health treatment programs or housing-related services. No more than 10% of the revenues collected may be used to supplant existing local funding for such services. Passed in 2015.
Wisconsin Tax Increment Legislation. Wisconsin amended Tax Increment Financing legislation to allow tax increment financing to be used to fund affordable housing in cities throughout the state. The Act enables municipalities to extend the life of expired tax increment districts for one additional year and use the funds to support affordable housing. At least 75% of the increments received are to benefit affordable housing in the city and the remaining 25% is to be used to improve the city’s housing stock. Passed in 2009.
State Funds to Support Local Housing Trust Funds:
Iowa Housing Trust Fund. The Iowa Finance Authority administers a state housing trust fund and commits at least 60% of the funds to a Local Housing Trust Fund Program. The trust fund receives revenues from the state real estate transfer tax. To be eligible to apply for funding from the Local Housing Trust Fund Program, a local housing trust fund must be approved by the authority and have:
- A local governing board recognized by the city, county, council of governments, or regional officials as the board responsible for coordinating local housing programs.
- A housing assistance plan approved by the authority.
- Sufficient administrative capacity in regard to housing programs.
- A local match requirement approved by the authority.
The award from the Local Housing Trust Fund Program is not to exceed ten percent of the balance in the program at the beginning of the fiscal year plus ten percent of any deposits made during the fiscal year. Each local housing trust fund must submit a report annually to the authority itemizing expenditures. Funds are targeted to serve households at or below 80% of the state median household income. At least 30% of the trust fund money must be directed to households earning no more than 30% of the state median income. Passed in 2003.
The Florida William E. Sadowski Act dedicates funds from the documentary stamp tax to a State Housing Investment Partnership program (SHIP) and the Florida Housing Finance Corporation. The SHIP Program provides funds to all counties and entitlement municipalities in the state. Local governments receive annual allocations, by formula, based on population. The minimum allocation is $350,000. In order to participate, local governments must establish a local housing assistance program by ordinance; develop a local housing assistance plan and housing incentive strategy; amend land development regulations or establish local policies to implement the incentive strategies; form partnerships and combine resources in order to reduce housing costs; and ensure that rent or mortgage payments within the targeted areas do not exceed 30 percent of the area median income limits. Passed in 1992.
California has taken several steps to advance local funding of affordable homes. For years, California communities benefited from the availability of redevelopment agency tax increment funds, with a state requirement that 20% of these funds be committed to providing and preserving affordable housing, the state had some $1 billion in funds each year to provide secure affordable homes throughout the state. Governor Jerry Brown eliminated the redevelopment agencies in December 2011. A portion of the tax increment funds collected in redevelopment areas that originally went to the Redevelopment Agencies have now been redirected to each jurisdiction’s general fund. Two options are available to recapture the funding: (1) a portion or all of the redirected funds (referred to as boomerang funds) from the former Low and Moderate Income Housing Fund (the required 20% set aside) can be committed to affordable housing activities and (2) a portion or all of ongoing annual tax increment revenues can be committed to affordable housing. These efforts began in 2012.
California’s Department of Housing and Community Development (HCD) administers a Local Housing Trust Fund matching awards program. A $2.85 billion voter approved housing bond (Proposition 1C) has funded the program which operates as a competitive grant program that helps finance local housing trust funds dedicated to the creation or preservation of affordable housing. Eligible applicants include cities, counties, and charitable nonprofit organizations. Passed in 2006.
State Enabling Legislation for Local Housing Trust Funds:
Arizona law permits general-law counties to establish housing trust funds, pursuant to A.R.S. 11-381. The county board of supervisors may establish a county housing trust fund by resolution, administered by a housing trust fund board or the board of supervisors. Funds are to serve low income households with priority given to funding activities that provide for operating, constructing or renovating housing for low income households and to families with children. Passed in 2007.
The Minnesota Legislature enacted legislation that allows local governments to establish a housing trust fund or to participate in a joint powers agreement to establish a regional housing trust fund, with the following criteria:
- eligible activities: the development, rehabilitation and financing of affordable housing, rental assistance, down payment assistance, and homeownership counseling
- ability to award funds through grants or loans
- limit of 10% for administrative expenses
- ability of a local government to assign the administration of the housing trust fund to a nonprofit organization
- requirement for annual reporting made available to the public
The legislation also lists potential revenue sources including but limited to bond proceeds, appropriations from local government, investment earnings of fund, housing and redevelopment authority levies, state and federal funds, and private contributions. Passed in 2017.
South Carolina created enabling legislation (the Mescher Act of 2007— H3509) for a municipality, county, or regional housing trust fund to be created by ordinance. The funds are to promote new construction or rehabilitation of affordable housing with a preference to households earning no more than 50% AMI. The funds are to be administered by a nonprofit organization with annual reports submitted to the local government and available to the public. Passed in 2007.
For more information, download the 2013 Housing Trust Fund Project report State Legislation to Promote Local Housing Trust Funds.